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Andreas Fulda is an associate professor at the School of Politics and International Relations at the University of Nottingham, where he specializes in EU-China relations, democratization studies, and citizen diplomacy. His new book, Germany and China: How Entanglement Undermines Freedom, Prosperity and Security, examines Germany’s dependence on China and its costs. The following is a lightly edited transcript of a recent conversation.

Q: Germany’s policy towards China for decades has been defined as ‘change through trade’. What are the underlying assumptions behind this policy? And why are they flawed?

A: If we want to make sense of this foreign policy paradigm, we need to take a step back and look at Germany’s history. In the aftermath of World War Two, Germany was severely restricted in setting its own security policies, and as a result economic statecraft became a major focus. And so for German politicians like Egon Bahr [state secretary in the 60s and 70s] but also later Helmut Kohl [chancellor from 1972 to 1998], the idea of change through trade was a way to establish economic ties with autocracies. 

The problem with that was that for a newly liberal democracy like West Germany, there was a lot of resistance to normalizing autocracies. And so it became politically expedient to downplay the authoritarian nature of Germany’s trading partners.

Do you think that extends into more modern times?

Definitely. In an export-oriented economy like Germany’s, businesses have always been on the lookout for new markets, including places like Russia and China. And so if we want to trace Germany’s entanglement with China throughout history, then we can probably trace it all the way back to the late 1960s and early 70s and the early days of rapprochement with the Soviet Union. But that’s certainly accelerated throughout the 1990s.

When do you think Germany realized there is a problem with its approach, and was it too late?

I argue that we have a problem with autocratic China, because the Chinese Communist Party poses a threat to freedom, prosperity and security, not only at home, but also abroad. Politicians are waking up to the fact that the Chinese leadership often talks of partnership. However, in reality, what we see or experience are underhanded tactics, which are aimed at interfering in democracies such as Germany’s. The CCP is using three concerning methods: one, clandestine diplomacy, two, manipulating trade and technology for leverage, and three, spreading disinformation. 

What is highly concerning is that these tactics have not raised threat perceptions in Berlin, or at least not enough. It has everything to do with these now falsified foreign policy paradigms, like change through trade, which assumes that by intertwining our economies, this would not just bring about liberalization and democratization, for example, in China, but also promote peace. But now we realize that through entanglement with autocratic China, Germany has actually lost much of its strategic autonomy. Acknowledging that is very difficult, because it would mean to acknowledge that some of our politicians and policymakers have subscribed to what the Austrian psychotherapist Alfred Adler has called a life lie. A Lebenslüge refers to a deeply held belief that success is impossible due to external factors beyond one’s control. Essentially, it becomes a way of deflecting responsibility.

Can you help us define strategic autonomy?

In the past, there was this thinking that economic interdependence cuts both ways, so by trading with China, we would become more dependent, say, on raw materials from China, or big companies would become more dependent on access to the Chinese market; but China would also become dependent on the trade relationship with us. That’s the classic kind of thinking.

But the underlying assumption is flawed. People don’t understand that for revisionist states, trade ties can and are being weaponized for geopolitical objectives. This is where things become very complicated indeed. Because if we don’t understand, for example, the nature of China’s state-led economy and the role that the Party plays, it is very easy to overlook this dimension. 

…by entering into a commercial partnership with China, [democracies] need to be mindful that, for example, tech transfers, which are often involuntary, are actually helping Chinese industries to leapfrog the rest.

Very often German actors, whether they are politicians or industrialists, feel that they are in control in this relationship. Yet when I look at their interaction with their Chinese counterparts, I can see that, in fact, they’re already being manipulated. We have this curious phenomenon of Beijing constantly issuing threats of retribution. And that is then combined with political inertia in Berlin and on the German side, and that then leads to real world damage.

What would you say is Germany’s biggest problem as a result of its entanglement with China?

In a nutshell, Germany has been blackmailed for a very long time, but it’s not admitted as such. 

Let’s take the demise of the solar industry. It’s very interesting because of the parallels to the current debate about protective tariffs against the Chinese EVs. In 2012, we also had a looming trade war between the EU and China. But the Merkel administration was against sufficiently high protective tariffs on solar panels. Why? Because they were afraid of retaliation against German automobile companies. Brussels imposed relatively moderate tariffs, and as a result, the German and European solar industry was crippled by a flood of cheap Chinese imports. 

The second example came four years later, with the takeover of Kuka Robotics. Kuka is interesting because it was a poster child for Germany’s advanced manufacturing industry. It was taken over by [Chinese electronics firm] Midea in 2016. Efforts to form a [rival] European consortium failed in part because Daimler [the German automaker] was reportedly afraid of upsetting Beijing by joining this consortium.

The most recent example is on 5G and the role of Chinese technology. This is the clearest example of Beijing throwing around its economic weight. In 2019, the Chinese ambassador warned that excluding Huawei from 5G could have repercussions for German car companies. Not surprisingly, neither the Merkel nor the Scholz administration has dared to exclude Huawei from its critical infrastructure. This is highly problematic, because many experts have raised concerns about digital privacy, and also national security. They worry about the potential for espionage or even sabotage.

These three examples are all linked to the corporate overexposure of German car manufacturers, like Volkswagen, BMW and Mercedes-Benz. In a nutshell, the problem for Germany is that these conglomerates are seen as too big to fail. And therefore Scholz and the chancellery will not do anything to jeopardize their operations in China.

What about the influence of the German private sector? And why do you think that has proven to be so important in Germany’s internal debate?

In terms of foreign trade promotion, the German state has effectively outsourced foreign policy to the private sector. That seemed like a clever strategy to support Germany’s export-oriented economy. But the flip side was that these companies would prioritize their corporate interests, rather than Germany’s national interest. In the ‘60s and ‘70s, you could argue that there was a greater overlap between the two, but now it is debatable whether we can still argue that what is good for BMW is also good for Germany. Germany now is just one country among many in which BMW produces cars.

And so what do you think of [current German chancellor] Olaf Scholz’s approach so far? And what is your take on his recent visit to China?

I’m really worried about Scholz and his team’s apparent inability to learn from the fiasco of Germany’s Russia policy. It should have become very clear now that many of the assumptions of Germany’s Russia policy were deeply flawed. The inability to admit a fundamental policy mistake also makes it difficult for other parties who are now governing with Scholz’s Social Democrats to change course.

Have there been any changes compared to the Merkel administration?

I argue that [Germany’s] foreign policy paradigms have morphed from a monopoly into dogma. The biggest problem with dogmatic thinking is that it seems carved into stone. It’s incredibly difficult to challenge. Change through trade was difficult to challenge, because it seemed to work. China became more prosperous. A kind of middle class evolved, a civil society was clearly visible. 

However, one should have realized early on during the Xi era, that things were going in the opposite direction. The German political system was unable to pick up those signals and process them in time, so it took until 2018 for people to realize that we do have a problem with Xi Jinping and China. 

Where would you say broad public opinion on China is in Germany?

Some public opinion surveys suggest that the German public is much more critical than German elites. I do think that they are accurate, because the problem that we see is that the CCP has managed to cultivate a network of German elites who are sympathetic to the Party. 

The problem is that these elites, either for ideological reasons or perhaps because of their professional identity or their interests, start to do the Party’s bidding. That is very problematic for public discourse because these hidden agendas will not be apparent to the casual observer, and then it creates an uneven playing field. 

Couldn’t you also argue that Scholz’s approach gives Germany a competitive edge at a time when other major economies like the U.S. are souring on China? 

We need to go back to the issue of China’s state-led economy. The CCP is aiming for domination in entire industries. We can see it in the solar industry, but we can also see it in other sectors where the party has stated objectives to become globally dominant. Think of ‘Made in China 2025’ [A state-led industrial policy unveiled in 2015].

…Germany is deeply entangled with China. And the extent of this entanglement goes beyond just the commercial sphere. It also has implications for the global economy and political decisions at home.

The problem for democracies is that by entering into a commercial partnership with China, they need to be mindful that, for example, tech transfers, which are often involuntary, are actually helping Chinese industries to leapfrog the rest. Once they do so, they become so dominant that this comes at the expense not only of Western companies, but whole industries. So the price that we pay for the short-term economic benefit is deindustrialization. In the long term, it actually undermines the industrial base in liberal democracies.

It can also be argued that for a lot of companies, in order to be competitive, they do need China, whether as part of their global supply chain or for its market. 

The problem with that argument is that it doesn’t account for geopolitical risks. Let’s take Volkswagen. It is heavily dependent on the Chinese market in terms of its revenues. But what would happen to the company should we see the military annexation of Taiwan? There would be war in East Asia. There would be economic sanctions on China and it would lead to a hard decoupling. So what happens then to the factories and the assets of a big conglomerate like Volkswagen? 

Or take BASF, the chemical giant: they’re heavily invested in China, too. They invested more than €10 billion for one of their factories in southern China. You can’t just pack up and leave. My worry is then that if there were a conflict, they would turn around and say you need to bail us out because we cannot survive this shock. Under the current political circumstance, I think they would probably get away with it. But I don’t think that taxpayers should bail out companies that have taken extraordinary risks by putting all their eggs in the China basket.

So do you think decoupling or de-risking is a solution?

The problem with the discourse about de-risking and diversification is that it’s primarily geared towards diversifying global supply chains. That can be done. But that’s just a stop gap measure. It doesn’t solve the problem of blackmail, for example. And that is why I would argue for partial decoupling, not full decoupling, which is unrealistic.

Partial decoupling is necessary to reduce the liabilities that I’ve outlined. If the German federal government is not able to make a decision on 5G and Chinese suppliers, because of the corporate overexposure of the automobile companies, then that is not just a problem for these companies, it’s a problem for the German state. It’s then imperative that the German state find solutions to encourage them to reshore their businesses, or at least, near-shore them to one of the European member states. Partial decoupling could work.

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Click here to read Bernhard Bartsch and Claudia Wessling’s op-ed on Germany’s new China strategy.

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Do you think that the EV industry is on the same path as solar energy? Europe is considering tariffs right now, is that a step in the right direction?

I would hope so, but I’m also skeptical because there will be a lot of pressure on Brussels not to impose levies like the United States. If there’s again a compromise on the levy they settle on and they are too low, we may actually see a repeat of the solar debacle. This would not only be bad for German and European industry. It’s also a national security risk. EVs are computers on wheels. They collect an awful lot of data. And we cannot simply assume that this data is safe if it is stored on Chinese servers.

Therefore, I absolutely think we need to decouple the automobile industries. And yes, I think we will come to a situation where you have EVs made in China for China, EVs made in Europe for Europe, and perhaps North America, simply because of national security concerns.

Would you say that right now, given German companies’ dependency on China, Germany in general is in a weaker position to push back?

The overall situation is that Germany is deeply entangled with China. And the extent of this entanglement goes beyond just the commercial sphere. It also has implications for the global economy and political decisions at home. It also bleeds into other policy fields, such as international cooperation and academic collaboration.

When I propose partial decoupling, even such a proposal will be fiercely rejected. There will be interest groups, both in Germany and China, who will be opposed to this because it’s not in their interest. The problem is, doing this necessary work will not endear the government to anyone because it will increase costs, you will need to take on interest groups. It’s very thankless work, but it’s absolutely necessary to restore national sovereignty, to prevent deindustrialization, and to strengthen democratic resilience.

We have seen a string of arrests in the West of alleged Chinese spies. Why do you think countries like Germany are ill-prepared for this threat? And are these arrests a sign that they’re finally dealing with it?

Russia’s war of aggression against Ukraine was a game changer. China’s tacit support for Russia has opened many people’s eyes. And there is a growing realization that we have a problem, not only with Putin, but also with Xi Jinping. There is now more willingness to accept this conflict, which is very important. It arguably has been with us for a long time. But in the past, there was the hope that if one downplays the interference by autocracies in our democracies, that this could help mitigate the problems. 

Increasingly, there’s a realization that one has to be more careful and that pushing back is beneficial in the long term because it does set boundaries where there haven’t been boundaries before. So I find it actually quite heartening to see our security agencies stepping up to this. 

You argue that espionage and transnational repression are part of a wider issue, which you describe as hybrid interference. Can you tell us more about that?

Hybrid interference is a combination of various means of clandestine diplomacy conducted through China’s United Front system, such as the manipulation of trade and technology for leverage and spreading disinformation. And if these means are combined, it has a force multiplying effect, so it is possible for the CCP to charm Chancellor Scholz; coerce German industrialists, threatening them by saying they may lose their access to the Chinese market if they don’t comply with their demands; and they can confuse the German public by suggesting that somehow it’s the Western alliance NATO which is to blame for, say the military conflict in East Asia. 

The challenge with hybrid interference is that it happens in the gray zone between war and peace. Because it’s hidden and many of the vectors are, in fact, elite channels into general politics, business, but also society, it is not so noticeable unless you are yourself involved in some of these policy fields.

These nefarious activities often do not raise threat perceptions. You can be subject to hybrid interference without noticing. The irony of it all is that some well-meaning academics then say, do not exaggerate the danger of autocracies because there is not enough evidence to support your claims. The problem is you will never have enough evidence to convince these critics. And what they also overlook is that hybrid interference is conducted in a clandestine way so that it doesn’t raise threat perceptions.

And so the dilemma is that I cannot necessarily prove that some of the discourse participants are being bribed, unless I have access to their bank accounts. Only the state can do this kind of counterintelligence. But our intelligence agencies have been asleep at the wheel. And therefore, at least for this period of time, civil society has had to step in and remind the state that it has a responsibility to protect democracy. 

How have you seen that played out in academia?

The debate has shifted somewhat. It is now more widely acknowledged that self-censorship is indeed a problem. It can be a legitimate coping strategy to protect oneself and loved ones, especially if you have family in China, but collectively it’s unacceptable because it undermines academic freedom.

So if I have come to understand, for example, that a Chinese body is a threat to freedom and prosperity, then I am obliged to speak about what I perceive as a threat and not downplay it for tactical reasons. If I engage in self-censorship and I don’t address certain topics, or only speak about them in certain ways, I would do the public a disservice because I would be withholding very important information, which is actually required for the government to make informed decisions, or for businesses to assess their risks, or for people in society to decide whether or not they should travel to China under these circumstances. 

You mentioned your own emotional arc as a scholar studying in China and working with grassroots organizations in the country, from having hope to becoming disappointed and frustrated, and ultimately developing resilience. Can you tell me more about this journey?

I have to put my cards on the table. I shared many of the illusions that many well-meaning Westerners had when it came to China. I talk about it as ‘thoughtful wishing’ because we were wishing for China to be successful and to evolve in a more rule-based direction with a strong civil society. But that has not come to pass. As a practitioner, I could see this very early on. And in 2014, I was mourning for a China that wouldn’t come. I had to accept that the direction of travel was a very different one. 

By the time Document No.9 [an internal directive issued in 2013 that took aim at Western ideological perils] was leaked, it became very clear that Xi wasn’t a reformer. And everything that came afterwards basically followed that playbook. We’ve seen the rise of the Chinese security state, which is very concerning. Because it has undone all of the small steps of liberalization in the previous decades, particularly during the Hu Jintao era, and it’s so clearly a point of political regression that one has to recognize the Chinese Communist Party has become increasingly totalitarian.

It has very profound implications for everything from geopolitics to trade to academic cooperation. Because if these are the political realities, then no amount of thoughtful wishing will change that reality.

…we were wishing for China to be successful and to evolve in a more rule-based direction with a strong civil society. But that has not come to pass. As a practitioner, I could see this very early on.

It’s very hard because you pour all your energy into your work and you hope for the better. I had to accept that China would not become more liberal and democratic, but instead more autocratic. When I learned about the internment camps in Xinjiang, I made a conscious decision, I would no longer work within the confines of the system. I would speak up.

What’s your take on Xi’s recent visit to Europe? And what are some of the commonalities between France and Germany?

It’s interesting the kind of countries he visited. He does know where the weak points are in Europe: France and Hungary and Serbia. These are all countries where he can leverage existing ties and dependencies, and the goal is to prevent Europe from developing a more united European China policy and pivoting towards the United States. We need to acknowledge that Xi is politically savvy, he knows what he’s doing and he certainly has succeeded in dividing Europe.

Are there differences between France and Germany’s position though?

I know more about Germany. My impression with France is that [President Emmanuel] Macron likes to speak about European sovereignty but that is often a kind of a code word for Europe not aligning itself too closely with the United States. Now this is something the CCP can exploit. And for Germany I think I’ve said it all, Germany is so heavily entangled with the CCP and with autocratic China that Xi didn’t even consider it necessary to visit Berlin.

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